Texas Instruments at Lehman Brothers Annual Technology Conference - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

TIM LUKE, ANALYST, LEHMAN BROTHERS: Okay. Good morning. This is Tim Luke from the semi side of the research house. In terms of format for our next presentation, we're going to have a presentation, and then we're going to take a two-minute break, and then we're going to do Q&A in this room with our next presenter.

And, clearly TI, Texas Instruments, is a major bellwether within electronics. Within TI, clearly one area has delivered a consistent series of superior revenue growth numbers, superior margins, that business being the high-profile, high-performance analog arena. Gregg Lowe, a more than 20-year veteran from TI, has been the key architect between-- or one of the key architects behind the growth of HPA and around-- In 2006, he took over the whole portfolio of analog, including all of customer analog, analog being, as we may remember, almost-- or perhaps now over 40% of TI's revenues, split almost evenly now between the custom and the HPA arenas.

We're delighted to have Gregg here. He's going to talk about all the growth opportunities within analog. He's going to talk about the opportunities for driving incremental revenue growth and incremental margin expansion, both within the HPA but also the custom arena. Gregg and Dave Paul, who's here from Investor Relations, have been reminding us that TI will be doing a full mid-quarter update on Monday. That's December 10. So we're going to keep our questions on strategy and long term rather than the near term. But, with that, I was delighted to have Gregg Lowe, SVP for Analog for TI, here to keynote. Thank you so much, Gregg.

GREGG LOWE, SVP ANALOG, TEXAS INSTRUMENTS: Well, thank you very much, Tim, and thank you very much for joining this breakfast session. As I walked in this morning and noted all the food in the back, it reminded me of some of the breakfast sessions we have with our analog engineers. And the only difference is all the donuts would be long gone by now.

So let me talk about our analog business and, first off, kind of framing it with the market. The analog market represents roughly a $37 billion opportunity for companies participating in that space. It's one of the largest subscriber-segments of the semiconductor business. So it's a very, very large and very good opportunity. It's basically split into two different categories, if you will. One is a catalog or high-performance standard analog business. The second is a vertically oriented or high-volume analog business. And TI has two separate business units that are going after each of those different market spaces with two different business models. One we call high-performance analog, and the second we call high-volume analog.

Now, our combined analog-- Excuse me. The analog business grows, or the market grows, at a relatively steady rate, somewhere between 10% and 11% on an annual basis. TI's analog business has grown over the last couple of years at a rate of around 14%, obviously a little bit higher than that 10% to 11% and so, therefore, outgrowing the competition and gaining a little bit of market share.

What I'd like to do is I'd like to talk a little bit about some of the things that we have done and some of the things that we have done and some of the things that we intend to do in the future to maintain sort of some momentum in this go-forward strategy on our analog business.

First, TI's analog business is largely made up of acquisitions. We acquired a number of companies a number of years ago to really give us a very solid footprint in this high-performance space. Prior to these acquisitions, TI had an analog business, but I wouldn't really classify it as a high-performance analog business. The acquisitions of Burr-Brown, Unitrode, Toccata and so forth of 2000 and 2001 really gave us a footprint. And what we've done in the meantime is taken those companies and integrated them into TI. And integrating them in was a key part of our strategy because it gave our sales organization an ability to present a single face to our customers and to bring a wide portfolio of products into our customers with an attempt to selling more products to those customers.

Now, we've maintained that as a momentum and most recently acquired two companies, one outside of Baltimore, the second in the Washington D.C. area - one in the IS space, the second in the power management space in ICD and power precise - and are doing the same thing effectively of integrating these companies into TI, leveraging the portfolio that they had, the design skills and talent that they had, and combined with the TI sales force to really drive revenue growth for those product lines.

What this fundamental capability has done is basically given us pretty strong product portfolio in each of the key elements that customers generally are looking for. What I'm showing here is what we generally refer to as a block diagram. This is sort of what customer designs generally look like. They have some kind of data converter, some kind of amplifier. Typically, there's some logic and interface products in there. Certainly, there's power management. Then, often times, there's a DSP. And customers have requirements in each of these different areas, generally speaking, and TI's position in each of these different areas is relatively solid. And this gives us a very, very-- two very interesting capabilities.

Number one, it allows our salespeople to approach customers in a different kind of fashion. Our salespeople can go into an account, walk up to a customer, and say, Hello, Mr. Customer. What is your biggest problem today? And that problem can be amplifiers, converters, DSP, power …